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Sole Proprietorship vs Partnership in Hong Kong

Sole Proprietorship vs Partnership | HK Companies

The easiest way for an entrepreneur to set up a company in Hong Kong is to register a company in sole proprietorship.

When the company requires to have more than one (i.e. multiple) shareholders, the entrepreneurs can incorporate a partnership company. This article explains the main differences between the operations of a sole proprietorship company and a partnership company.

Hong Kong Sole Proprietorship company

Registering a Hong Kong sole proprietorship company has the following requirements.

Shareholders: The number of shareholders of a sole proprietorship company can only be one person. There is no nationality limit for the shareholder of a sole proprietorship company. It is best for the shareholder to live in Hong Kong permanently. But if the shareholder does not reside in HK, he/she needs to appoint a Hong Kong resident as the representative for his/her sole proprietorship company. The sole proprietorship company’s shares are 100% owned by the single shareholder.

Director and Company Secretary: A sole proprietorship company incorporated in Hong Kong does not need to appoint any director or company secretary.

Registered Business Address: Must have a business address in Hong Kong. If the shareholder (or entrepreneur) of a sole proprietorship company does not need a physical office or shop to run his/her daily business, he/she can make use of a company secretary service. Through the company secretary service, the entrepreneur can obtain a Hong Kong registered address for the business.

Liabilities: The shareholder of a sole proprietorship has the rights to own assets or sign contracts. All the liabilities of the sole proprietorship belongs to shareholder. i.e. the shareholder must bear unlimited liabilities or debts that are incurred by the company (if any). In the case when the company has to shut down due to business insolvency, the shareholder must repay (or be liable) to all the company’s debts with his/her personal assets.

Must do after the Registration of a Sole Proprietorship: The shareholder must apply for a business registration certificate (BRC) at the Companies Registry within one month after the registration of a sole proprietorship company, and pay the fee for the business registration certificate. Renewal fee also has to be paid every year thereafter.

Annual Tax Return: No audit is required. No Profit Tax Return is issued to the sole proprietorship company from Inland Revenue Department (IRD) of Hong Kong. All profit of the sole proprietorship is taxed through the sharesholder’s personal Individual Tax Return.

Time Required to Register a Company: The registration of a Hong Kong Sole Proprietorship company can be completed within 1 business day.

Hong Kong Partnership Company

Incorporating a Hong Kong partnership company has the following requirements.

Shareholders: The number of shareholders in a partnership company can be from 2 to 20 persons. There is no restriction on nationality of the shareholders, but if all the shareholders do not live in Hong Kong permanently, it is required to appoint a Hong Kong resident (who resides in HK) as a representative. All the shareholders need to agree on how the company operates, the responsibilities and rights of each partner, and how shares and profits should be split among all the shareholders.

Director and Company Secretary: A partnership company registered in Hong Kong does not need to appoint any director or company secretary.

Registered Business Address: Must have a business address in Hong Kong. If the shareholders (or entrepreneurs) of the partnership company do not need a physical office or shop to run their daily business, can make use of a company secretary service. Through the company secretary service, the shareholders can obtain a Hong Kong registered address for the business.

Liabilities: The shareholders of a partnership company have the rights to jointly own assets or sign contracts. Except any limited partners, other shareholders who are not limited partners are required to bear unlimited liabilities or debts of the company. In the case when the company has to shut down due to business insolvency, the shareholders (who are not limited partners) must repay (or be liable) to all the company’s debts with their personal assets.

Must do after the Registration of a Partnership Company: The shareholders must apply for a business registration certificate (BRC) at the Companies Registry within one month after the registration of a partnership company, and pay the fee for the business registration certificate. Renewal fee also has to be paid every year thereafter.

Annual Tax Return: No audit is required. No Profit Tax Return is issued to the partnership company from Inland Revenue Department (IRD) of Hong Kong. All profit of the partnership is proportionally taxed through all the partners’ personal Individual Tax Return.

Time Required to Register a Company: The registration of a Hong Kong Partnership company can be completed within 1 business day.

More Information on the Registration of Sole Proprietorship or Partnership Companies

During the registration of the company, entrepreneurs can choose the validity period of the company’s business license, which can be for 1 year or 3 years.

When submitting the application form for the business registration certificate, a photocopy of the Hong Kong identity card of the shareholder of the sole proprietorship is also required. In the case of a partnership company, photocopies of the Hong Kong identity cards of all partners must also be provided.

The payment methods for the business registration certificate fees include cash, cheque, and EPS.

The license (business registration certificate) must be placed at the business address location. A good example is to hang the business registration certificate on a wall at a prominent position within the business premises.

There is no nationality restriction on shareholders who want to register a Hong Kong sole proprietorship or partnership companies. They can be non Hong Kong residents.

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